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2011 ECONOMIC FORECAST Hari Singh

Seidman College of Business. 2011 ECONOMIC FORECAST Hari Singh. Truth and Disclosure National GDP in 2010. Our forecast for 2010 was 2% to 3% GDP. Q1: 3.7%. Q2: 1.7%. Q3: 2.6% . Q4: Projected: 2.3%. Average for 2010 could be 2.6%. Truth and Disclosure Regional employment projections.

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2011 ECONOMIC FORECAST Hari Singh

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  1. Seidman College of Business 2011 ECONOMIC FORECAST Hari Singh

  2. Truth and DisclosureNational GDP in 2010 Our forecast for 2010 was 2% to 3% GDP. • Q1: 3.7%. • Q2: 1.7%. • Q3: 2.6% . • Q4: Projected: 2.3%. • Average for 2010 could be 2.6%.

  3. Truth and Disclosure Regional employment projections • Projected private employment in 2010 was 0.50%. • Actual increase of about 0.30% to 0.40%. • NSA: Nov. 2011 compared to Nov. 2010. • Longer drags: Empirical models don’t pick up turning points in a timely fashion. • Subjective: CEO forecasts may be subject to exaggerated psychological mood swings. • CEO forecasts appear to be more accurate for the last two years. .

  4. Broad based recovery gaining momentum • The Conference Board Leading Economic Index™ (LEI) is a good proxy for growth in the next six months.Wasat 104.9 in early 2010 (2004=100). • Significant increase to 112.4 in December 2010. • LEI has five consecutive months of growth. • Factors contributing to LEI growth: Improvement in financial indicators, consumer expectations, manufacturing, and early labor market indicators.

  5. Increased growth in 2011 • Low dollar and strong growth in Asia will fuel exports. • Consumption growth will be modest but significant. • Private investment will pick up momentum. • Federal and state fiscal policies will be a drag or neutral at best. • FED will keep interest rates low.

  6. Employment prospects • Productivity has risen significantly as existing workers utilized more intensively. • Temporary hiring is up. • Job creation will pick up steam in a zigzag fashion. • By the end of the year: Monthly growth of 200,000 – 250,000 jobs. • Natural rate of unemployment: 6% to 7%.

  7. How will the West Michigan Economy perform in 2011? • All indicators point in one direction: • West Michigan is having a significant turnaround. • Restructuring in manufacturing has bottomed out and beginning to grow again. • Growth in health sector, education, and professional services. • Overall growth will be significant.

  8. West Michigan Confidence Index 2011

  9. Employment projected at 2% for 2011

  10. Digging deeper into the employment numbers • Last year 36% of the respondents indicated that they will hire workers in 2010. • This year approximately 60% have indicated that they will hire in 2011. • Of the persons who responded, about two thirds (66%) indicated that they would hire permanent workers. • Corroborate a pick up in hiring.

  11. Overall sales growth will be modest (2.5%)

  12. Exports a bright spot: 9% growth

  13. Blue and Red: Perennial OptimistsGreen (Pragmatic): 2010 (36%); 2011 (42%)Purple (Pessimistic): 2010 (45%); 2011 (37%)

  14. Prospects for West Michigan • Employment growth will be 2%. • Expected overall sales growth of 2.5%. • Export growth is a robust 9%. • Health-related services, specialized services, and education will pick up the slack. • Importance of positioning: Provide incentives for green technologies. • Ensure that our graduates continue work in Michigan.

  15. The outlook in 2011 for the national economy? • Monetary Policy: FED impact is minimal. • Govt. tightening: Both federal and state. • At best fiscal policy is neutral. • Growth expected to pick up over the year. • Overall GDP growth: 3% to 4%. • Employment will improve significantly. • Unemployment rate of 7% by Nov. 2012?

  16. Caveat: Gorilla in the Room • Pressing Need: Dramatic increases in Basic R&D, Education/Training, Alt. energy innovation. • Positive scenario: Credible tax increases (in the guise of tax simplification) and long term entitlement reductions. • Negative scenario: Market loses confidence in our long term fiscal viability and there is a run on the dollar. • Muddle through: Not enough capital investment.Long term progressive decline of economic foundations.

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